FOREX-Euro still in the doldrums, ECB Draghi speech in focus

Reuters Staff

4 Min Read

* Euro wallows at three-month lows vs USD

* ECB Draghi speech to take centre stage in quiet start to week

* U.S. and UK markets shut for public holidays

By Ian Chua

SYDNEY, May 26 (Reuters) - The euro slipped early on Monday, while the other major currencies got off to a steady start as the results of a presidential election in Ukraine and votes for the European Parliament were so far greeted calmly by investors.

Dealers expect little action on Monday with U.S. markets closed for Memorial Day, while UK markets are shut for the Spring bank holiday.

The common currency last traded at $1.3629 compared with around $1.3631 late in New York on Friday. It briefly dipped to $1.3615, a low not seen since mid-February. Against the yen, it was a touch softer at 138.96.

The euro has fallen more than 2 percent on the greenback since May 5 amid mounting expectations that the European Central Bank (ECB) will ease policy next month.

In the near term, it is seen drifting between $1.3600, where large bids are said to be lurking and its 200-day moving average at $1.3639.

Traders said the policy outlook will continue to be a negative factor for the euro rather than results of the weekend elections.

Billionaire Petro Poroshenko claimed Ukraine’s presidency on Sunday and vowed to end a conflict with pro-Russian rebels. In Europe, there was a general swing to Eurosceptic parties as voters protested against austerity and mass unemployment.

“The reality is that these results - in France especially - won’t mean a whole lot in practise but optically it’s an obvious pretext for some pressure on euro and sterling,” said Ray Attrill, strategist at National Australia Bank in Sydney.

“The best hope for some life later today resides with a keynote speech from ECB President Mario Draghi. Markets will be looking for more clues as to what may be on offer following next Thursday’s ECB Council meeting,” he said.

With the euro on the backfoot, the dollar index held near a six-week peak of 80.443 set on Friday. Against the yen, the greenback retested a 1-1/2 week high of 102.02 set on Friday.

The Australian dollar was little changed at $0.9239, having formed a base just above 92 U.S. cents after a recent selloff that saw it fall from 94 cents.

Markets seemed to have come to the realisation that the Reserve Bank of Australia will keep interest rates at a record low 2.5 percent for the foreseeable future.

In Asia, the Bank of Japan will release minutes of its April policy meeting followed by a speech by BOJ Deputy Governor Kikuo Iwata.

With the BOJ having repeatedly expressed confidence that its policy setting is delivering desired results, traders expect the minutes to reveal nothing new.